Tim Horton's profit drops; revenue shy of forecast

JudyMcKinnon

Tim Hortons Inc.'s
THI, +0.00%
second-quarter earnings dipped 4.4%, hurt by lost earnings from the sale of Maidstone Bakeries and a charge related to the surprise departure earlier this year of its former president and chief executive.

The big Oakville, Ont.-based coffee and doughnut chain's overall revenue was up nearly 10%, with same-store sales improving 3.8% in Canada and 6.6% in the U.S. Systemwide sales were up 7.2% on a constant-currency basis.

Second-quarter net earnings fell to C$96 million from C$101 million, though overall share earnings improved to 58 Canadian cents from 54 Canadian cents, helped by fewer shares outstanding.

Results in the latest quarter included a charge of 3 Canadian cents a share related to the surprise departure of former president and chief executive Don Schroeder, a long-time employee and former franchise owner who had held the top position since 2008.

Excluding the charge, earnings were in line with the Thomson Reuters mean estimate of 61 Canadian cents a share.

Revenue of C$702.8 million fell shy of the C$713 million analysts had been expecting.

Just after release first-quarter results in May that fell short of analyst expectations, the coffee giant announced the departure of Schroeder. Paul House, executive chairman, was named to take over as interim chief executive until a replacement is named.

Tim Hortons has been struggling to expand in the U.S. market where it faces heavy competition from Dunkin' Donuts, whose parent recently went public, and other chains. Late last year, it closed 36 underperforming U.S. restaurants, shifting its focus to its core northeast and midwest markets south of the border.

The company said it continues to focus restaurant development and enhanced advertising on those core growth markets in the U.S. It opened 10 new U.S. locations in the quarter, including a mix of standard, non-standard and self-serve kiosks.

In Canada, Tim Hortons opened 24 restaurants in the latest quarter, most of which were standard restaurants.

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